Highlights
Activity for the bulk of the economy accelerated further in February from an already strong pace, according to the ISM's non-manufacturing report where the headline composite index rose three tenths to 59.7. The reading is above 50 to show month-to-month growth and is above January to show month-to-month acceleration, but here again only mild acceleration.

February's strength is centered in output readings including acceleration for business activity (akin to a production reading on the manufacturing side) and in employment which came in at 55.6 for a more than one point gain and the best reading of the recovery.

Order readings are strong especially for backlog orders which are now piling up. Export orders also are strong though exports for non-manufacturers are a fraction of those on the manufacturing side.

Today's report is yet another positive for the economic outlook. Note that readings here are not skewed by price effects as respondents are asked to judge month-to-month change in volume terms, not price terms. Stocks are extending gains following this report.

Recent History Of This Indicator
January's ISM non-manufacturing report posted gains that were widespread and convincing. The composite index jumped 2.3 points 59.4, a recovery best. The manufacturing series is particularly strong, rising to 61.7 from 58.9 in December while the employment index improved to 54.5, reflecting a 1.9 point gain in January. Looking ahead, February numbers are likely to be robust as the new orders index to 64.9 from 61.4 in December.

Definition
The non-manufacturing ISM surveys more than 375 firms from numerous sectors across the United States. This index covers services, construction, mining, agriculture, forestry, and fishing and hunting. The non-manufacturing composite index has four equally weighted components: business activity (closely related to a production index), new orders, employment, and supplier deliveries (also known as vendor performance). The first three components are seasonally adjusted but the supplier deliveries index does not have statistically significant seasonality and is not adjusted. For the composite index, a reading above 50 percent indicates that the non-manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. The supplier deliveries component index requires extra explanation. A reading above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries. However, slower deliveries are a plus for the economy—indicating demand is up and vendors are not able to fill orders as quickly.
Why Investors Care

The ISM non-manufacturing survey does not compile a composite index like its manufacturing cousin. The business activity index, which is actually akin to the production index in the manufacturing survey, is widely followed as the key figure from this survey.Data Source: Haver Analytics